Trader Joe's Dropping Health Coverage for PT Workers

Frequently praised for extending healthcare coverage to many of its part-time employees at a reasonable price, Trader Joe's last week told workers who log less than 30 hours a week that they will need to find insurance on the Obamacare exchanges next year.

In the memo to staff dated Aug. 30, Dan Bane, Trader Joe's CEO, said the affected part-time workers would instead get an annual $500 payment to help them buy insurance elsewhere, according to Bloomberg News. The company estimated that more than 70 percent of those affected would pay less for comparable health insurance on the exchanges.

"Depending on income earned outside of Trader Joe's, we believe that with the $500 from Trader Joe's and the tax credits available under the ACA, many crew members should be able to obtain healthcare coverage at very little, if any, net cost," Mr. Bane wrote in the memo.

Starting in 2015, the Affordable Care Act law will require employers with a workforce of 50 or greater to offer health coverage to workers who average 30 or more hours a week. Employers who don't comply will face fines.

Other companies are starting to cut health insurance benefits or reduce hours for part-timers to 29 hours in anticipation of the legislation.

Despite Trader Joe's claims that most part-timers in the end would pay even less, labor activists saw the move as a tactic to cut corporate overhead.

One anonymous part-timer at Trader Joe's, who said she pays $35 a paycheck or $70 per month, for a plan that covers 80 percent of medical costs, has a $500 deductible and includes prescription drug coverage, told The Huffington Post that the coverage was "one of the best parts about the job," and was anxious over finding an affordable alternative.

Sources at Trader Joe’s, who spoke on the condition of anonymity, told RetailWire that portraying Trader Joe's as cutting employees' hours to get them under 30 hours a week is inaccurate. Two managers with the company said they were actually trying to get workers to commit on an on-going basis to more hours as the popularity of the chain increases.

Many retailers do offer part-time employees healthcare coverage, but largely at exorbitant rates.

Among those known for generous packages, Whole Foods has no plans to change its health benefits, a spokesperson told Bloomberg News. The grocer provides coverage for those working more than 20 hours a week, although those working fewer than 30 hours weekly pay their own premiums.

Starbucks, which covers part-timers who work 20 hours a week or more, doesn't plan any changes either. In late August, Starbucks CEO Howard Schultz told Reuters his company "won't use the new law as an excuse to cut benefits or lower benefits for its workers."